BANKRUPTCY BASICS - Frequently Asked Questions About Bankruptcy
Can I
still file bankruptcy after the new bankruptcy law ?
Yes. The new
law changed the bankruptcy rules, but the law did not eliminate
your right to bankruptcy protection.
Do have
to take a credit counseling course before I file bankruptcy?
The new bankruptcy
law requires all debtors to fulfill two education requirements:
a credit counseling course prior to filing and a financial management
course after the filing date. Failure to complete
either of these courses and file the appropriate certificates
with the court will prevent a successful bankruptcy. The Chapter
13 Trustee will offer the required courses to Chapter 13 debtors,
but Chapter 7 debtors are required to take the courses on their
own. All bankruptcy education courses are available in
person, by phone, or over the internet and are approved for
the district in which you are filing. Most courses take less than one hour to complete and costs less than $50. You may get additional
information about the costs and availability of debtor education
at one or more of the following agencies approved for the Middle
District of Florida: In
Charge Education Foundation, Inc.; Consumer
Credit Counseling Service of San Francisco; GreenPath
Debt Solutions; In
Person and Internet Institute for Financial Literacy; Telephonic
Money Management International, Inc.; Novadebt.
Who can file bankruptcy?
Any person residing,
domiciled, or having property or a place of business in the
United States may file Chapter 7. A business may also
file a Chapter 7. The new bankruptcy law includes a "means
test" which applies an income vs. expense test in order
to file Chapter 7 bankruptcy. If the means test indicates you have enough disposible income to pay a significant portion of your unsecured debts you have to file under Chapter 13, provided you meet Chapter 13 debt ceilings. There are currently no minimum
or maximum income limits or other income requirements or limitations
for people whose unsecured debts are primarily non-consumer
debts such as investment liability, business losses, taxes,
or student loans.
What is a Chapter 7 bankruptcy?
Chapter 7 bankruptcy
is the most common type of bankruptcy and is often referred
to as a "liquidation bankruptcy." In Chapter
7, all of the debtor's assets, other than those types of assets
specifically exempt from liquidation by statute, are turned
over to a bankruptcy trustee for sale. Sale proceeds,
if any, are distributed among the creditors. Most Florida
Chapter 7 debtors have little non-exempt personal property because
of Florida's liberal exemption laws. Chapter 7 bankruptcy
is used to eliminate, or discharge, primarily unsecured debts
such as credit cards or medical bills. Chapter 7 does
not eliminate secured debts, such as vehicles (unless the secured
item is surrendered). Chapter 7 will not
save a house from foreclosure nor a car from repossession if
you are delinquent in payments. Under the new bankruptcy
law, only people who pass the "means test" may file
a Chapter 7 bankruptcy. People who fail the means test have
to file Chapter 13 bankruptcy provided you are under Chapter 13 debt ceilings. The means test is a complicated
mathematical formula. Your bankruptcy attorney can run a means
test using bankruptcy software after he collects necessary information
from you.
What is a Chapter 13 bankruptcy?
Chapter 13 bankruptcy
results in a plan to repay all or part of your debt, but it
is not designed to discharge or eliminate most debts.
Chapter 13 is used most often to save a house from a foreclosure
sale. You can use Chapter 13 to "strip" a second mortgage under certain circumstances. Chapter 13 is also useful to eliminate some IRS
debt and to establish an affordable plan to pay IRS debt that
cannot be eliminated. Chapter 13 bankruptcy is available
to debtors with regular income. A business cannot file
Chapter 13. In addition, there are upper limits on the
amount of the individual's secured and unsecured debts in Chapter
13 cases.
Who can file bankruptcy
in the Middle District - Orlando Division?
The Orlando Division
accepts bankruptcy filings from individuals who reside or are
domiciled in one of several central Florida counties including
Orange County, Seminole County, Volusia County, Lake County,
and other surrounding counties. Any Florida resident can
file bankruptcy in Florida. If you file bankruptcy in
Florida, however, you can only claim Florida's asset exemptions
if you have resided in Florida for the previous two (2) years.
Otherwise, you must use exemptions of the state where you previously
lived for two years or, in some cases, the default set of federal
bankruptcy exemptions.
Can married people file
bankruptcy jointly?
Married debtors can
file a joint bankruptcy petition for a single filing fee, and
most attorneys charge the same legal fee for joint cases as
they do for individual cases. Married couples who are
jointly liable on most debts should file a joint bankruptcy.
On the other hand, if only one spouse is liable on most of the
debts, the indebted spouse may file an individual bankruptcy,
and in most cases, the individual debtor's bankruptcy will have
no adverse effect on the non-filing spouse.
Do I need an attorney
to file bankruptcy?
Bankruptcy law does
not require that you hire an attorney to prepare a bankruptcy
petition or to represent you in your bankruptcy case.
If you enjoy doing things yourself, or if you really cannot
afford an attorney, you can find forms on the internet needed
needed to file your own petition. However, bankruptcy
is a complicated area of the law, and the bankruptcy law gives
no special treatment to debtors who file their own petition.
The new bankruptcy law makes filing bankruptcy substantially
more complicated and the practice of bankruptcy law is therefore
more specialized. I strongly believe that the financial
risk of filing your bankruptcy incorrectly under the new bankruptcy
law is much greater than the amount of a reasonable fee paid
to a bankruptcy attorney.
How much do attorneys
charge for bankruptcy?
In the past, most consumer bankruptcies
were relatively simple and legal fees were low. The new
bankruptcy law increases the amount and complexity of legal
work required to prepare a bankruptcy petition and successfully
complete a filing, and as a result, legal fees are higher than
they used to be. Also, the amount of work and fees will
vary according to the debtor's income level. As a general
guideline, a debtor below Florida's median income should
not have to pay more than $2,000 in legal fees
for a simple Chapter 7 bankruptcy. The court charges a
$299 filing fee, and there may be other costs for financial
education required by the bankruptcy law. A debtor with
income above Florida's median income will usually have
to pay $300 to $500 more as additional paperwork is required.
It is possible, but difficult, to file bankruptcy without the
help of an experienced bankruptcy attorney.
Chapter 13 cases are
more complicated, and legal fees are higher. The Orlando
judges expect and approve legal fees of approximately $4,500 (in addition to the filing fee) to file and complete a standard
Chapter 13 case. If your Chapter 13 case involves a wholly-owned
business, or other complicated legal issues, legal fees will
be higher. The good news is that most attorneys require
a down payment of approximately $1,500 to $2,500 (plus the filing
fee) to prepare and file a Chapter 13 case. The balance
is paid through the Chapter 13 plan over a period of several
months.
